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What is the weighted average cost of capital of action inc

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Question - Action Inc. was recently given a rating of A by Moody's and has a credit spread of 3.5% on its debt. The firm finances its operations with both debt and equity. Action Inc.s book value of debt is $80 million, currently trading at 125% of par value. The firm has book equity of $76 million, and 3 million shares trading at $40 per share. The firm's beta is 1.4, the return on the market portfolio is E( Rmarket) = 9.5%, and the risk-free rate is 3.5%, while the corporate tax rate is 25%. What is the weighted average cost of capital (WACC) of Action Inc?

Reference no: EM133081446

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